Sensata Technologies Holding Stock

Sensata Technologies Holding plc operates as a global industrial technology company.

The company develops, manufactures, and sells sensors and sensor-rich solutions, electrical protection components and systems, and other products used in mission-critical systems and applications that create valuable business insights for its customers and end users.

The company provides a wide range of customized solutions that address increasingly complex engineering and operating performance requirements to help its customers solve their most difficult challenges. The company serves customers in the automotive, heavy vehicle and off-road (HVOR), fleet management, industrial, clean energy, and aerospace industries.

The company’s sensors are used by its customers to translate a physical parameter, such as pressure, temperature, position, or location of an object, into electronic signals that its customers’ products and solutions can act upon. The company’s electrical protection portfolio (which includes both components and systems) is consisted of various switches, fuses, battery management systems, inverters, energy storage systems, high-voltage distribution units, controllers, and software, and includes high-voltage contactors and other products embedded within systems to maximize their efficiency and performance and ensure safety. Other products and services the company provides include vehicle area networks and data collection devices and software, battery storage systems, and power conversion systems, the latter of which include inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications.

Original equipment manufacturers (OEMs) are facing ever-increasing mandates, due to regulation and consumer demand, to make their products safer, cleaner, and more efficient, electrified, and connected. The company’s products and solutions are being used by its customers in applications to address these demands, including those that help: industrial customers introduce new energy-efficient and environmentally friendly motors, compressors, and heating, ventilation and air conditioning (HVAC) systems; transportation customers to meet the standards of emissions and pollution-control legislation; and fleet managers to proactively monitor the location and performance of their vehicles and to operate more efficiently.

The company has long-standing relationships with a geographically-diverse base of leading OEMs and other multinational companies. In certain geographic and product markets, where it is more effective and efficient for the company and its customers, it uses third-party distributors to sell its products. The company’s largest customer accounted for approximately 6% of its net revenue for the year ended December 31, 2022.

Business Strategy

The company’s business strategy involves leveraging certain material growth drivers to deliver products used in mission-critical systems and applications that create valuable business insights for its customers and end users. These growth drivers include the overarching trend related to its core historical business that enables vehicles, industrial equipment, aircraft, and other systems to be safer and more energy-efficient (a trend which it refers to as Safe & Efficient); and certain new and emerging technology trends that complement or enhance its existing product offerings (which it refers to as megatrends).

The company focuses on expanding its market share on electrified platforms, including sensors, electrical protection components and systems, and battery-energy management systems as full solutions. Many of the components and subsystems the company has historically developed and produced will play a significant role in this expansion, but it has and will continue to consider strategic partnerships and acquisitions to accelerate the growth and transformation of its product portfolio. By entering such relationships, the company obtains access to new technologies, expertise, processes, and solutions, which it can leverage with its existing expertise to optimize and expand its product portfolio.

The company is seeking to expand its business and accelerate market share in other areas will experience high growth in the future, such as the deployment of Internet of Things (IoT) solutions for light- through heavy-duty vehicles, particularly in fleets. Within IoT, the company’s principal area of focus is the Sensata INSIGHTS business, in which it delivers data insights across heavy, medium, and light vehicle fleets.

The company’s strategies of leveraging core technology platforms and focusing on high-volume applications enable it to provide its customers with highly customized products at a relatively low cost compared to the systems in which its products are embedded.

The company’s transportation addressable markets (automotive and HVOR) are large today and growing, with expectations that they will continue to grow over the next ten years. In addition to transportation applications, manufacturers of material handling equipment, marine vessels, aircraft, and industrial systems are also addressing ever-tightening greenhouse gas emissions regulations and taking advantage of falling battery costs and increasing energy capacities of lithium-ion battery cells to provide electrified solutions to their customers.

The company provides many of its innovative and differentiated components, such as those used in braking, tires, and environmental control, from traditional internal combustion engine vehicles for use in electric vehicle applications. Specific to electric vehicles, the company also provides and is developing several components that enable the safe and efficient operation of electrified platforms, such as high-voltage electrical protection, advanced temperature and thermal management sensing, highly-sensitive electric motor position, and next-generation current sensing.

Within Electrification, the company addresses the needs of the charging infrastructure necessary to support the electrification ecosystem. In addition, the company sees opportunities in industrial and grid applications, some of which are nascent. Sensata is a leading provider of high-voltage electrical protection on electric vehicles and charging infrastructure and the company seeks to be the partner of choice for HVOR, industrial, marine, and aerospace OEMs transitioning to electrified solutions. The company also intends to participate in other areas of the evolving market that enable electrification to become more widespread.

To better pursue clean energy components and system opportunities, in fiscal year 2021, the company organized a new business unit in its Sensing Solutions reportable segment, Clean Energy Solutions, which includes products and solutions, such as high-voltage contactors, inverters, rectifiers, and battery management systems, that serve the industrial, stationary, and commercial energy conversion and storage end markets. With the fiscal year 2021 acquisitions of Spear Power Systems (Spear) and Sendyne Corp. (Sendyne), the company expanded its portfolio to include energy storage systems and electrical sensing products, augmenting its offerings to its existing end markets, as well as providing access to new end markets and applications.

With the fiscal year 2021 acquisitions of Xirgo Technologies, LLC and SmartWitness Holdings, Inc. (SmartWitness), the company expanded its capabilities to provide data insights to transportation and logistics customers through telematics, video telematics, asset tracking devices, and other cloud-based solutions. In addition, the fiscal year 2022 acquisition of Elastic M2M, Inc. (Elastic M2M) augments the company’s cloud capabilities critical to delivering actionable sensor-based insights, an increasingly important capability in this fast-growing industry segment.

Elastic M2M

On February 11, 2022, the company acquired all of the equity interests of Elastic M2M, Inc. (Elastic M2M), an innovator of connected intelligence for operational assets across heavy-duty transport, warehouse, supply chain and logistics, industrial, light-duty passenger car, and a variety of other industry segments. Elastic M2M primarily serves telematics service providers and resellers, enabling them to leverage Elastic M2M’s cloud platform and analytics capabilities to deliver sensor-based operational insights to their end users. This acquisition augments the company’s cloud capabilities critical to delivering actionable sensor-based insights, an increasingly important capability in this fast-growing industry segment.

Dynapower

On July 12, 2022, the company completed the acquisition of all of the outstanding equity interests of DP Acquisition Corp (Dynapower), a leader in power conversion systems, including inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications. Dynapower also provides aftermarket sales and service to maintain its equipment in the field. Dynapower is a foundational addition to the company’s Clean Energy Solutions strategy and will complement its recent acquisitions of GIGAVAC, Lithium Balance, Sendyne, and Spear.

Segments

The company operates through two segments, Performance Sensing and Sensing Solutions.

Performance Sensing

The Performance Sensing reportable segment, which accounted for approximately 74% of the company’s net revenue in fiscal year 2022, represents an aggregation of two segments, Automotive and HVOR. It primarily serves the Automotive and HVOR industries through the development and manufacture of sensors, high-voltage solutions (i.e., electrical protection components), and other solutions that are used in mission-critical systems and applications. Examples include those used in subsystems of automobiles, on-road trucks, and off-road equipment, such as tire pressure monitoring, thermal management, electrical protection, regenerative braking, powertrain (engine/transmission), exhaust management, and operator controls. The company’s products are used in subsystems that, among other things, improve operating performance and efficiency, contribute to environmentally sustainable and safe solutions, and provide data-driven insight, connectivity, and prognostics to commercial fleet operators and asset managers.

For fleet transportation and logistics customers and end users, the company provides hardware and services that enable a variety of end-use applications, including vehicle tracking and on-board vehicle diagnostic data to monitor vehicle health; the provision of vehicle data to enable usage-based insurance offerings; cargo capacity data for trailers that increase the operational efficiency of fleets; video telematics offerings that provide event analysis and in-cab monitoring to prevent and lower the cost of incidents; and visibility to where assets are located across the supply chain.

Customers

The company’s customers include leading global automotive, on-road truck, construction, and agriculture OEMs, the companies that supply parts directly to these OEMs, known as Tier 1 suppliers, various aftermarket distributors, fleet transportation, and logistics customers. As its customers develop common global electrified platforms to drive scale and efficiency across their global markets, the company is well-positioned to serve them with its global manufacturing and technical centers. The company also sees the growing importance of new ‘startup’ OEMs as market disruptors, and Sensata’s flexibility, speed, expertise, and global footprint provide these new entrants with a supplier/partner capable of meeting their demanding requirements. The company provides all its customers with a worldwide technical, manufacturing presence and service support to enable their success globally.

Markets

The markets the company serves are seeking to provide cleaner, safer, more electrified, and connected solutions. The company’s solutions are present in a wide variety of transportation systems and subsystems, playing a critical role in ensuring the functionality and safety of a vehicle’s operation. Within the combustion and electrified propulsion architecture, the company provides various sensor solutions (e.g., electric motor position, gasoline direct injection, oil pressure monitoring, fuel delivery, and various others) that enable superior functionality, efficiency, and optimized performance while reducing environmental impact. As electrification proliferates, the ability to protect the vehicle systems/sub-systems from high-voltage power sources becomes critical, a need that the company’s electrical protection portfolio (e.g., high-voltage contactors, fuses, high-voltage junction boxes) addresses. The company’s chassis (e.g., tire management solutions), thermal management (e.g., pressure plus temperature sensing), and safety (e.g., braking and electronic stability control) sensor/product solutions all play critical roles in enabling the safety, improved performance, and increased efficiency and range of both electrified vehicles and internal combustion engine powertrains.

Applications the company serves require close engineering collaboration between it and the OEM or their Tier 1 suppliers. Solutions are designed to meet application-specific requirements with customer-specific fit, form, and function. As a result, OEMs and Tier 1 suppliers make significant investments in selecting, integrating, and testing sensors as part of their product development. Once the company’s solutions are designed into an application, it is well positioned as the incumbent supplier due to the high degree of sensor customization and application/vehicle platform certification. The company continues to drive investments in innovative technologies, competencies, and solutions to enable its customers' success as they pivot toward an electrified world. Transportation industries provide some of the largest markets for sensors, giving participants with a presence in these markets significant scale advantages over those participating only in smaller, more niche industrial and medical markets.

Product Categories

Sensors: The company offers pressure sensors, speed and position sensors, and high-temperature sensors. Its key applications/systems include thermal management and air conditioning systems; powertrain; exhaust after-treatment; suspension; braking; tire management solutions; operator controls; radar solutions; and battery packs.

Electrical Protection: The company offers high-voltage contactors/fuses; battery management system; charging inlet modules; and high-voltage distribution units. Its key applications/systems include electrical protection, electrical powertrain, battery management, and charging systems.

Other: The company offers vehicle area networks; and data collection devices and software. Its key applications/systems include data insights (asset tracking and vehicle telematics); and usage-based insurance.

Sensing Solutions

Sensing Solutions, which accounted for approximately 26% of the company’s net revenue in fiscal year 2022, primarily serves the industrial and aerospace industries through the development and manufacture of a broad portfolio of application-specific sensor and electrical protection products used in a diverse range of industrial markets, including the appliance, HVAC, water management, operator controls, charging infrastructure, renewable energy generation, green hydrogen production, and microgrid applications and markets, as well as the aerospace market, including commercial aircraft, defense, and aftermarket markets.

Some of the products and solutions the segment sells include pressure, temperature, and position sensors, motor and compressor protectors, high-voltage contactors, solid state relays, bimetal electromechanical controls, power inverters, charge controllers, battery management systems, operator controls, and power conversion systems. The company’s products perform many functions, including prevention of damage from excess heat or electrical current, optimization of system performance, low-power circuit control, renewable energy generation, and power conversion from direct current (DC) power to alternating current (AC) power.

The company’s Clean Energy Solutions business includes products, such as high-voltage contactors, inverters, rectifiers, and battery management systems and focuses on the industrial, stationary, and commercial energy storage end markets. Applications include those in battery-energy storage and renewable energy. With the acquisition of Spear Power Systems (Spear) and Sendyne Corp. (Sendyne), the company expanded its portfolio to include energy storage systems and electrical sensing products, augmenting its offerings to its existing end markets, as well as providing access to new end markets and applications. In addition, the company’s acquisition of Dynapower is a foundational addition to its Clean Energy Solutions strategy.

Customers

Overall, the company’s customers include a wide range of industrial and commercial manufacturers and suppliers across multiple end markets, primarily OEMs in the climate control, appliance, medical, energy and charging infrastructure, data/telecom, aerospace and defense industries, as well as systems integrators and aerospace and motor and compressor distributors.

Markets

Demand for the company’s sensor products is driven by many of the same factors as in the transportation sensor markets: regulation of emissions, greater energy efficiency and safety, and consumer demand for new features. Gross Domestic Product growth is a broad indicator of demand for its consolidated industrial markets over the long term. The company uses Purchasing Managers' Index to gauge short-term trends in the industrial, appliance, and HVAC markets it serves. For instance, the growing consumer demand for cleaner heat sources, like heat pumps, which utilize the company’s content, is being driven by government initiatives to reduce carbon emissions to net zero by 2050.

The company continues to focus its efforts on expanding its presence in all global geographies and serving its global customers in a highly efficient and cost-effective manner. The company’s customers include established multinationals, as well as local producers in markets, such as China, India, Eastern Europe, and Turkey.

Clean Energy Solutions serves a broad range of industrial, transportation, and stationary energy storage end markets with applications, such as battery-energy storage, microgrids, and renewable energy generation and storage applications. The company’s go-to-market approach leverages existing channels and also includes new channels.

Product Categories

Electrical protection: The company offers bimetal electromechanical controls, circuit breakers, high-voltage contactors/fuses, battery management systems, energy storage systems, and switches and relays. Its key applications/systems include motors, compressors, pumps; home appliances; lighting; commercial and military aircraft; marine/industrial; data and telecom equipment; medical equipment; and recreational vehicles.

Sensors: The company offers position sensors, pressure sensors, temperature sensors, and gas leak detection sensor. Its key applications/systems include motors, compressors, and pumps; hydraulic machinery; motion control systems; commercial and military aircraft; and motor/platform controllers.

Other

The company offers inverters, brushless DC motors, current sensors, rectifiers and frequency converters, and power conversion systems. Its key applications/systems include recreational vehicles; and grid harmonics and power delivery.

Business Strategy

The company’s business strategy involves leveraging certain material growth drivers to deliver products used in mission-critical systems and applications that create valuable business insights for its customers and end users. These growth drivers include the overarching trend related to its core historical business that enables vehicles, industrial equipment, aircraft, and other systems to be safer and more energy-efficient (a trend which it refers to as Safe & Efficient); and certain new and emerging technology trends that complement or enhance its existing product offerings (which it refers to as megatrends).

The company focuses on expanding its market share on electrified platforms, including sensors, electrical protection components and systems, and battery-energy management systems as full solutions. Many of the components and subsystems the company has historically developed and produced will play a significant role in this expansion, but it has and will continue to consider strategic partnerships and acquisitions to accelerate the growth and transformation of its product portfolio.

Patents

The company’s patents have expiration dates ranging from 2023 to 2045. The company also owns a portfolio of trademarks and license various patents and trademarks. Sensata and the company’s logo are trademarks.

Research and Development (R&D) Expense

The company invests in R&D in megatrend-related areas to design and develop differentiated solutions for the fast-growing trends impacting its customers’ businesses, Electrification and Insights/IoT. Megatrend-related R&D expense for the year ended December 31, 2022, included $68.5 million.

Seasonality

Because of the diverse global nature of the markets in which the company operates, its net revenue is only moderately impacted by seasonality. Sensing Solutions experiences some seasonality, specifically in its air conditioning and refrigeration products, which tend to peak in the first two quarters of the year as inventories are built up for spring and summer sales. In addition, Performance Sensing's net revenue tends to be weaker in the third quarter of the year as automotive OEMs retool production lines for the coming model year. The company’s Sensata INSIGHTS business within Performance Sensing tends to peak in the last quarter of the calendar year as customers exhaust their annual capital budgets.

Environmental and Governmental Regulations

Many of the company’s products are governed by material content restrictions and reporting requirements, examples of which include European Union (EU) regulations, such as Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH), Restriction of Hazardous Substances (RoHS), and End of Life Vehicle (ELV); U.S. regulations, such as the conflict minerals requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act; and similar regulations in other countries, such as the German Explosives Act. Further, numerous customers across all end markets require the company to provide declarations of compliance or, in some cases, extra material content documentation as a requirement of doing business with them.

History

Sensata Technologies Holding plc was founded in 1916. The company was incorporated under the laws of England and Wales in 2017.